Bitcoin Forum

Greetings! :)

Me and some buddies will soon be making an University presentation based on digital economies and we are considering using bitcoins as our main subject. We haven't really had the chance to formulate any serious questions and if we do pick bitcoins the questions in the future will probably be a bit more advanced. But here's something I personally have wondered instead and I'll just throw it out there.

Why are bit coins being made (minted)?
To me it would be more reasonable to release the full amount from the start or in a worst case scenario organise a trust which releases bit coins at a set rate.  From a cynical point of view this could be argued to be some advanced fom of a ponzi-scheme hidden in a pyramid-scheme.

The ponzi-scheme from my perspective seems to be the very nature of the digitcal coin.
It is rooted in no production increase for a specific authority/group and so each minting in in theory one of maximum inflation.
If there is 1 coin to begin and 1 coin is minted the value of the previous coin should be cut in half.
This part can be forgiven because it also serves a purposes, while it can be consideed a ponzi-scheme it can also be considered a service for which you pay to have access to. You get the anonymity and the global access. Ponzi-scheme may not even be the right word but in one way it is because its value is increasing from increased investment not from increased profit.


But the pyramid-scheme part is to me the most serious part.
It seems to be that those who got in the earliest (pre - 2012) will get out the most from this whole thing in the end. Partly because of reasons above but partly also because clearly the early minter has an early advantage. In the end minting will become almost impossibe.


In either case, even if you do not agree with this please do tell me why the amount of bit coins should be limited at 21^ and not unlimited?


Thanks! :)


Here comes a new question after some thoughts and discussion:

To who?

Problem: bitcoin is based on the "trust no one" rule

Meh, people in 2012 cried that people in 2011 had moar bitcoins than them. People in 2011 cried that people in 2010 had moar bitcoins than them. Same for people in 2009. For 2008 no because back then bitcoin didn't exist.

The point is, who invested in bitcoin back then, risked a lot. The second half of 2011 and the first half of 2012 was a period where the bitcoin price kept dropping and dropping, not increasing. People had tons of time to invest and buy cheap bitcoins but guess what? They did not want to RISK! They prefered to say that bitcoin was dying, that price would drop to 0 and blablabla instead of invest.

And today they cry because who risked, now is happily profiting. Why didn't they buy at 15$? Or at 10? Or at 5? It dropped to 2 and less!

And have inflation? No thank you.

I didn't invest as I didn't know of it's existence... Can I cry and whine now? ;)

And i didn't mine gold back in prehistory because i wasn't alive back then.

Same for bitcoin, since it share tons of properties with gold. I like to call bitcoin "digital gold"

The new bitcoins are there to bootstrap the currency, to reward the miners, to put the bitcoins in circulation in a "trust no one way" and have them secure the blockchain even if today the transaction fees are still looow (like 0.3 btc per block of fees) and not enough to pay for the security
Generating infinite bitcoins means inflation, wich is bad.

Why are bit coins being made (minted)?

if they did your idea of a trust or did a ponzi-scheme it would defeat the entire purpose of bitcoins as it would centralize the system to either one person slowly releasing bitcoins or someone having to be trusted to release bitcoins (currently they would earn millions upon millions) which would make alot of bitcoin user's see it like another currency like paypal which means its controlled taxed and vulnerable.

the apeal of bitcoin is you grow the network by mining you do what the hell you want and its your business legal illegal no ones to say you cant spend it on what you want, not to mention people like me who feel very very smug that the governments have no way to tell how much money i have in bitcoins so cant tax me on it :D

also people who got on the bitcoin early will make more money but have also invested more by mining and taking the risk of bitcoin not taking off and loosing all there money in the process (solidcoin comes to mind)

in the end i could spend weeks and weeks arguing about bitcoin both good and bad points but also note bitcoin must fill some gap in the market otherwise it wouldn't be so damn successful :D

Please review my post again fellas.
The reason for the 2012 date is because I read somewhere that it was in December 2012 that mining became quite alot more difficult per hash.
Please explain to me what bitcoins has in common with gold?

Either it is a ponzi-scheme or an added inflationary cost to the whole worlds currency supply created out of thinner air than the so called fiat currency that is supposed to be build upon economic growth and thus stay at 0 inflation. Please note that I am not suggesting that they should do a ponzi-scheme, I am suggesting that it is a variation of the ponzi-scheme.

Part of the criticism against gold and its many bubbles have also always been that its value is exaggerated by its investors and that it is not related to its output value and while gold has a value in both industry and jewelry bitcoins have none beyond their function as a service - one that could be argued gold has in addition to its actual value.

Inflation with bitcoins (one way or an other) starts at the second coin minted.
There's no reason to stop at 21^ if there is a feeling that the full sum can't be sold right away by its creators.


In effect you are creating money out of thin air but as I said it does provide a service in itself.
So the ponzi aspect of increased value based on increased investment and not profit (and thus return) I can accept to a degree.
What I have a hard time accepting or understanding are the pyramid-scheme aspects of it all.

why haven't you done a prober research yet!

( tell me why the amount of bit coins should be limited at 21^ and not unlimited? )

here are some interesting links:

https://en.bitcoin.it/wiki/Controlled_supply

and

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Not to mention the "future of Bitcoin"
http://youtu.be/mD4L7xDNCmA

Good luck with your presentation  :)

Ok hold stop! Have you read and understood http://bitcoin.org/bitcoin.pdf ? This should be your first read before any questions.
Refering to above, read and understand it, your answer is in the question:
This is the mining community, open source like Linux. The coins are being mined for this very reason, release a steady amount over time.

While it has some of the typical characteristics of a ponzi-scheme, it has also some characteristics that point against the fact it is a ponzi-scheme.

You have no "Trust" origination, due to this transactions are being broadcasted globally. And everybody gets to see everything. While the mining provides the initial distribution from coins, it also serves to safe keep all of bitcoins transactions data/history. For this purpose, eventually mining will be completely paid out of transaction fees, when all coins are mined.

Well, in '11 they had this podcast with one of the main developers, who explained it pretty well. In the early days he had done a lot of mining, and collected over 10.000 BTC however he put this all into a website giving away 0.1 BTC for someones email address, just to create more awareness for bitcoin. (this was during the peak back then) Then the interviewer asked, what if you kept all your bitcoins, you would have had close to half a million US dollars now. On which the developer said, well if you look at it from the other way, if I would have kept all my coins, Bitcoin might have never become this popular and rise this far in price.

Big risk, big payout... And then only if you didn't spend your 10.000 BTC on 2 pizzas... I think this is pretty fair and also, most of the early adopters gave a lot of bitcoins away just to create more awareness about it and get it more popular. So yea I do expect most of them to have a secret stash of a 100 or a 1000 BTC somewhere hidden far away, but looking at the thousands if not millions they gave away... Plus all of this is a reward for them as without the early adopters bitcoin would have never made it.

If you do not have a fixed amount, it will result into inflation. (printing more money) I have no idea why and/or for what reason the number just under 21 million was chosen, but it will most likely have a mathematical purpose.  (if they told me the max would have been 4 billion I would've been happy too)

You're very welcome :)

Heya!

I'll try to watch the video at a late time but it is precisely the concept of controlled supply that worries me.
Since this money will not be issued in accordance to good and services available for that money it will in the end stop being a currency (even one created out of thin air) and simply a ponzi-scheme which people buy in hopes of increased value. There will be no point in purchasing anything since any purchase would thin out your finite investment and in the same way you couldn't possibly sell anything.

For those wishing to enter into new anonymous transactions a new digitical currency would be preferable.


I think in the best case scenario all bitcoin users are screwing over the rest of the world through their personal little federal reserve creating world currency that deflates the value of current currency. Butwhat happens as this minting stops and the pyramid-scheme part of things ends ?(frankly there is as someone mentioned no risk to this pyramid-scheme (the minting itself), it just is one). The risk is always in the ponzi-aspect (of the pyramid-scheme) and this is one of those rare, most interesting cases when joining the pyramid game is split from the ponzi-scheme.



Let's recoup a bit since I easily overstretch myself:

Pyramid-Scheme: People who mint early gain more over people who mint late.
Question: Who do they gain (Pyramid-players) from?
Answer: The Ponzi-Scheme investors who do not mint but hope to either gain from the bubble or the service by buying bitcoins from the minters.


PS: Thanks for the well-wishes. I hope that I am wrong because I am fascinate by the idea! I especally hope that I am wrong about the correlation between the minting and ponzi-scheme because let's face it. The long-term survival of bitcoins as a currency is based on those who want to use it as a service; not the minters and not the (bubble) investors.

I think it's a brilliant solution to a chicken and egg problem. Problem: you want a wide adoption of a virtual currency that has zero supporters, will have a finite supply, and will be supported by transaction fees.

How do you do this?

Answer: Slowly build support by initially rewarding miners with large block rewards and then ween them off block rewards and onto transaction fees by predictably decreasing the block reward.

Start here: https://bitcointalk.org/index.php?topic=7269.0
And this for the ponzi issue: https://bitcointalk.org/index.php?topic=7815.0

Ahh well, yea that was to be expected. (not the time/date, but that it would happen)

Once again read the paper, at some point mining will only be done by specialized companies due to the hardware requirements.

First hit was from CPU to GPU, second hit (currently going on) is from GPU to ASIC. Third hit will be towards even more specialized ASICs. Hence at some point only specialized companies are going to mine, as only for them it will be profitable.

Read Paper, the mining process, looks a lot like gold finding. (a lot of luck involved) As said before has some characteristics of a ponzi scheme, and some characteristics that point against a ponzi scheme.

This is fixed inflation to distribute the currrency, this is also short-term inflation. (when in 2140 the last coin is mined, there will be no more inflation, ever)

Well, my old Gulden, went to a Euro, and while they said a Euro was 2.20 Gulden, within a year I paid the same euro for the same coffee I paid in a gulden the year before. School thought me thats inflation. Inflation happens because more money gets printed / loaned. While a bank can loan me an Euro they don't have, I can't loan somebody a bitcoin I don't have. (he wouldn't be able to send this) Nor will a bank be able too :D
All of a sudden you don't have to trust anybody (your computer can calculate everything to see if all the mathematical proof is there) and all transactions are out there for everyone to see. (perfect for accountants, no more book juggling, just give us all your bitcoin addresses from last year.) The fact that you hit a max amount, just means no inflation, nobody can print / create more bitcoins, making the bitcoins every has worth less. What basically happened with my Gulden to Euro, and later on with the euro. A bread won't become more expensive overnight just because the government prints more money.

The whole trust, is based on mathematical proof, that a computer on average should've done so long on bruteforcing it. Once again read the paper and come back and let us know what you think. (really want to hear your opinion, you even send PM if you want too ;) )

You keep answering your own questions: Yes as long people keep using it as a currency it will get where it should be, and looking how things are going, it need another couple of years, but its up and coming.

But John.
Your FAQ does not answer why one would want to sell a finite resources increasing in value(once minting grinds to a halt) when one can form a new service which does not. Again and again.
And so when you reach this point (and we saw a spike of value right after 2012 decrease in production that is still going) the currency does in reality become a commodity, an investment and loses its function thus because it has not intrinsic value it must become a ponzi scheme.

My notion that it is a pyramid scheme builds only upon what I find to be a pyramid-scheme like way of supplying additional coins that perhaps could have been differently. I can not see any moral justification for rewarding the production of things that have no intrinsic value but I am not here to argue morals. Only the pyramid model itself.
Infinite supply could have been kept by spiral waves of new block-difficulties relieving old still keeping anonimity and algorithm safety but protecting the service and removing the pyramid-scheme aspect.

The morality of things would also be better as the minters would now be in a better position to argue that they are protecting a service, not using it.

@Milon
Thanks.
I'll read the paper over the weekend then!
Not really started any research, just throwing out some ideas.
Coming back later then.

In reply to your new post: My feeling based on my own limited understanding of basic economics is that the opposite is true. It was a service for very long while minting was stabile as I am advocate it should be (infinite) but that it will turn into a ponzi-scheme by default at the end of the minting/as minting decreases in profitability. Statistics related to December 2012 seem to support my notion.
PS: Finite release of 21^ at once would create the same problems and sooner but it would be more moral and it would test the theory sooner.

The mining difficulty increased, due to too much people mining and making to much money solving blocks to fast. (not a 10min average) Also the ASICs with are mining a factor 100 faster then GPUs make it look really strange... weird... suspicious... without having the full background story.

Mining will keep going forever, just because it actually validates and encrypts the entire blockchain. Eventually mining will be profitable from transaction fees only. Hence it kinda going into infinite loop. If mining becomes too profitable, to much people will do it. To much people mining difficulty will change and mining becomes less profitable. On the other hand if too few people mining, and blocks are not getting solved fast enough, the difficulty decreases and mining becomes more profitable. And more people will start mining. This will keep going infinite, always stabilizing itself. (this is the solution for the Dilemma known as Byzantine Generals as long as more than 50% of the nodes is honest, and was needed here in order to make bitcoin a success.)

Enjoy reading the paper over the weekend, and if you get some extra time, start reading up on more of the details from Satoshi, escpecially on the crypto mailing list.

Ye I started checking out that mail-list. It's great.

Do you know anywhere where I can find credible information on him/them?
(Not that the Wiki-entries and top google results are bad but if you know some personally that would be cool).

Well, start on bitcoin first, and go for Satoshi second. The best info you are going to get is either on the crypto mailing, or here on the forums, where he is both posting under the same username. And yea it would be very cool if I would've known the guy, or even joined up early enough to get to know him and ask him questions. (there is a lot of mystery around him, but you'll find that out once you dug deep into the rabbit hole called bitcoin)

Porsche sold for 300 bitcoins - https://bitcointalk.org/index.php?topic=143722.0

This is just the start, there's no point taking bitcoins to the grave.  Everyone will have a cash out point whether it be 1k, 10k, 100k etc.  Or rather most people will get to a point in which they think trading their BTC is worth the real goods and services that they are receiving.  The person who bought the Porsche thought their 300 bitcoins were worth that.

This is so incredible, This community has gone from a pizza for 10k to a porsche for 300... just think about that for a minute next time you're doubting it's value and the trust involved.  What's next?

"Me and some buddies are making a University presentation"

"Ponzi"
"Pyramid"
"Ponzi"
"Pyramid"
"money out of think air"
"morality of bitcoin"

Troll.

Ignore.

I'll answer that.

People do not want to receive a portion infinite resources, because infinite = worthless.  There is only value in scarcity.  Scarce resources (i.e. Gold and Bitcoin) are valuable.  So, if you create a "new service" which is not finite, then that new service will be worthless.  Who would want 10,000 inflatacoins when someone could create 10 billion more tomorrow?  No one would accept these coins in a trade.

Now, if you go to the age-old deflationary economy problem, here's a few of points to mull over:

- A deflationary currency has never actually been tried, only theorized about.

- A funny thing happens when people find that their wealth has increased - they begin to think about ways to spend it!  Imagine that tomorrow, you found that your bank account had $100,000 more in it than it had today.  What would you do?  Go out and party?  Buy a nice car?  Pay off a house?  Guess what - all of that is SPENDING!  When people have more wealth to spend, they spend it.

- There is also a psychological "risk analysis" that everyone goes through, either consciously or subconsciously.  It's something along these lines: "What if Bitcoin is worthless tomorrow?" "What if Bitcoin loses even 10% of it's value tomorrow?"  "What if my house burns down and I lose all my Bitcoins?"  "What if a stalker knows how much Bitcoin I have, and holds me at knife-point until I give them all to him?"  Etc, etc.  The bottom line is, there is a very real risk of loss of wealth when holding Bitcoin - enough of a risk that it causes people to "cash out" and begin spending them whenever they feel they are holding more than they can safely take care of.

- Deflationary currencies do encourage saving rather than spending - I will concede that point.  But it does not encourage it enough to completely kill an economy, as some economists would have you believe.  Rather, it reduces the propensity for people to go into ridiculous amounts of debt to keep up with the Joneses, and it reduces the government's likelihood of doing the same.  Deflationary currency would discourage people, businesses, and governments from taking out loans unless absolutely necessary.  Now ask yourself, is that really such a bad thing, to encourage people, businesses, and governments to save their money for a rainy day?

Heya Sgt.

Infinite (to a reasonable amount) does not mean infinitely available.
The general problem of bitcoins is that it is based on nothing but trust which is also something that has never been tried befoe.
So every discussion becomes extremely complex.
Most forms of fiat currency basically start out as IOU papers of some form.

Basically the idea is that I give you paper worth nothing for something but it is expected that you later give me something for nothing as well.
That's the idea around contolled money supply that follows GDP production. So it is still based on production, even if it has no real value.

Gold has intrinsic value and is quite rare and trade with it can be described as trade with an easily managable resource.
When trust in classical economic production and thus fiat currency falls then trust in commodities usually rises and gold which is not only a commodity but also partly a currency thus gets its bubble-like frowns on the chart.

You're right that a deflationary currency has never been tried but there has been criticism targete towards it.
Part of the reason for the implementation of fiat currency was so called "money hoarding".
People hoarded gold or gold-certificates and literally made money on money. This slows commerce, at least according to some modern economic philosophies. This is also part of the reason for fractional reserve banking where money is created out of debt in hopes of future economics investment and progress. (And obviously our economies are imploding since debt now exceeds wealth in critical sectors and growth can't keep up).

You may be right that commerce may not completely grind to a halt but it still doesn't answer the question of why mining should start at a high level and then grind downwards until a halt. Wouldn't an adjustable (in various way, not by a lever in someones home) mining rate following computing power advances be better?

like a presentation to your junior high? thats cool buddy!!  but I dont think you completely understand bitcoins, actually I think you kinda know about a lot of false information about bitcoins.  you should just focus on doing actual research with the links provided, read A LOT of the already created threads for god sakes before stumbling in here and creating a thread that is just awful.

PLEASE LET THIS KID BE IN HIGH SCHOOL AND NOT COLLAGE!!!!

Hey dude. We are actually studying in an IT college and towards user-centered design, BA and systemscience so economics is not our main cup of tea but things like security, system architecture, stability and such.
Personally I am alot more interested in the technical aspects and that's what I am researching mostly about.

These are just some concerns I had as a potential  BitCoin user.
Also reading some of the links provided atm!

Im really just gonna hit the ignore button...
If people arent going to do thier Own Research about "what is a bitcoin" and "Why is it valuble"  before they make a Presentation group of "Me and some buddies will soon be making an University presentation based on digital economies and we are considering using bitcoins as our main subject"

I cant shake my head hard enough...
Why dont you just ask "What is inflation?" and "Why it is bad?" aswell as "Why dont we just print more money"
You freaking stated "why is it a limited amount?, why not unlimited" THATS ONE OF THE MAJOR REASONS FOR GOVERNMENTS TO COLLAPSE, UNLIMITED MONEY.

You are a Fucking Troll, and if not, im not even going to call you a Tool, you're less than a tool, you're a Subtool, a fucking Drillbit

First, Bitcoin cannot be a Ponzi scheme because there is no person or organization defrauding investors. You don't know what a Ponzi scheme is, so it is difficult to understand your claim that Bitcoin will become a Ponzi scheme.

People spend bitcoins despite the fact that they are rising in value because the value of what they buy is greater (to them) than the present value of the amount they spend. In other words, people buy now because they don't want to wait until later when the value of bitcoin has increased.

The intrinsic value of bitcoin is a subject of debate, primarily because nobody can agree on what "intrinsic" value means. Either way, if you believe that bitcoin has no intrinsic value, then you must also believe that fiat currencies (dollar, euro, etc.) also have no intrinsic value.

I can see why people claim that bitcoin is a pyramid scheme, and it is hard to refute their claims. Bitcoin is not designed to be a pyramid scheme, but there is a substantial portion of people that buy bitcoins simply hoping that more people will buy them and drive up the price. On the other hand, if you consider bitcoin a pyramid scheme, then you must consider all currencies and commodities to be pyramid schemes because a large number of people buy them for the same reason.

@Jack
Hi!

What is inflation and why is it bad?
Greece is pobably kickinig itself in the balls right now because it can't inflate its currency.
But no, generally speaking inflation is bad.
My question is more: Why is deflation good?
I've been reading up on some of the links sent and still haven't really goten an answer to this although my confidence in other aspects of the bitcoin system is growing steadily.

Now Jack don't go about insulting me. I mean not to insult you!
The unlimited supply of money thing has worked pretty good for quite some time.
It's still doing well in countries that have actual economic growth.
That's not saying that a delfationary policy wouldn't work  but that's the point of topic.
Don't ever be afraid to examine your own positions!

@Obolvlobo
Heya

The idea is that the miners defraude the investors here.
Technically speaking here, not that anyone is doing it intentionally.


_________

The more I think about it the more I do not know if it should even be called inflation or deflation when we discuss bitcoins.
Perhaps falling or rising value is more correct? Inflation is tied to a specific economy.
At least if we tie Bitcoins value to its value as a service it should then behave more as gold or any other commodity or stock?
What are your thoughts on this and would a stabile value then be the best for the commodity to act as a currency?

I'll ad this question to the frontpage if possible.

True, but we know that it will behave like gold, more or less

Yeah. But I don't think it's inflationary neither now that  I think about it but that its value is changing (?).
Sure inflation and deflation isn't by definition only increase of moneysupply o decrease of it (tied or not tied to an economy) but then at 21^ or close to it "inflation" (and "deflation") should theoretically stop - shouldn't it?

But what's left then?
Would "value" rise? Must it rise?
If the currency can be divided into very, very small parts then it shouldn't (for currency purposes).
So perhaps my worries are unfounded.

But then this must indeed be nothing then a bubble. Value should if anything be falling as "Inflation"(supply) rises up until 21^!

It is absurd to claim that bitcoin is a ponzi scheme because miners are defrauding people unintentionally.

First, anyone can mine. Are you claiming that a person is committing fraud while he is mining, and is a victim of fraud while he is not mining?

Second, a person can't commit fraud unintentionally. Fraud requires intention.

No. It's not true. Gold (and gold-backed currencies) were deflationary for the same reasons that bitcoin is regarded as a deflationary currency: there is a finite supply and some portion is lost or destroyed over time.

Alright I agree with you!
We need new words!

What is a non-fraduelent investment that builds value not on the investments increased output but on new investments only.
What would Enron have been if nobody had "gone out" before it failed?
(it could be argued that people knew Enrons output wasn't anything near its investment value and thus a ponzi scheme but let's argue they didn't. What is it then "called" if not a ponzi scheme?)

The meanings of "inflation" and "deflation" are ambiguous. Sometimes the words mean a change in the money supply -- "inflation" is an increasing money supply. Sometimes the words mean changing prices -- "inflation" means the value of the currency falls.

When people talk about bitcoin as being "deflationary", they either mean that the demand for bitcoin is increasing faster than the supply, or they mean that coins are lost, so the supply goes down.

Alright let's not go to far out. That post was way to weird and when I think about it quite rubbish.
It's exciting to read and think about bitcoins. Every new article brings something new and interesting.

Enron was not a ponzi scheme. It seems like you think that every kind of financial fraud is called a ponzi scheme. It is not. A ponzi scheme is a specific kind of fraud.

So what was Enron? We need a word for it!

" Jump to: navigation, search
1910 police mugshot of Charles Ponzi, the namesake of the scheme

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. "

That's the definition I went after when creating this thread.
I was thinking if there was a better word for it without using a paragraph each time but I couldn't think of it.

The Atlantic seems to be leaning in my favor for example:
http://www.theatlantic.com/magazine/archive/2002/03/the-enron-ponzi-scheme/303156/

So let's swim easy here!

I'm not interested in discussing Enron. The only reason I have responded to your posts is that you are planning to make a presentation that is based on ignorance and is not supported by facts. I hope that by showing you the flaws in your thesis, you will not perpetuate myths about Bitcoin, and display a lack of knowledge in the process.

So you are not willing to provide an alternative word for it, you are not willing to discuss the two citations that support my definition of the word yet you seem willing to bash my definition of it!

Good for you then.
Let's redefine the word ignorance to!

(  :D)

Troll-pile

Bitcoins, much like yen or dollars or gold coins, have to come into existance somehow before we can use them. The way bitcoins are minted is the most democratic, verifiable, fair, and controlled among the currencies in use today.
I've minted bitcoins. You can, too. Try doing that with dollars, and consequences for you will be painful and violent. I don't see how anyone with at least half a brain functioning can have a problem with bitcoins "still being minted."

BluesBrother, you seem to misunderstand some essential attributes of Bitcoin.

Eh, it's not like "they" (who?) will decide to stop producing more coins at 21M. People will keep on mining forever, but by the very definition of Bitcoin, every next four years they will only mine half as much.

No, exactly the opposite. Bitcoin is based on not needing to trust anyone. Thanks to the magic of mathematics and cryptography.

Oh really? Why?

Bitcoin has intrinsic value because it offers some brilliant, new possibilities, technological advancements that perfectly fit with the digital information age we live in, and huge advantages over fiat currency and commodities like gold. So there you go.

:) I agree with everything here.
So no I haven't missed out but you put it into words better than I could.

About gold~
Gold has some intrinsic value but it's in a bubble now I think.

That's sorta what I thought in that "rubbish post" i made as well; especially since it can be divided up almost endlessly but then I thought about it a little bit extra and now I'm not so sure it works that way even if it's a resource that can't be consumed. Let's sleep over this an come back tomorow and tell me what you think.

Although you are wrong on one point.
As I said the victim is the "investor" the "fraudster" is the printer (minter) and the user (if he sells and buys frequently) isn't really either one but is using both for his own puposes.

This is if the theory is correct.

I guess half my brain isn't isn't yours ;)

Bitcoin is not a Ponzi.

In a Ponzi, if there are no more buyers, it collapses.

On Bitcon exchanges, if there are no buyers, the price would remain constant.

Bitcoin is a global borderless potentially anonymous value transfer system. It uses its own units of accounting which have to be kept scarce in order to be valuable (I don't think it doesn't matter much in this context if they would have been designed to slightly inflate forever or eventually cap out at 21 million, except the capped variance surely has always been more appealing to libertarians).

If people choose to invest, all they need to do is to hold some of the 21 million units whose value is determined by supply and demand. So they act like an asset, a share. But it's a share in an openly and transparently developed system, which is quite a novelty. And it's taking away real market share from PayPal, Western Union and others, which surely are not scams or pyramid schemes either. Good related read: https://bitcointalk.org/index.php?topic=168858.0

Now that doesn't mean there isn't any risk if people choose to invest. They have to know what they're doing. There are risks. There could be a total loss. There could be a better competitor. Governments could outlaw exchanges and merchants accepting it.

If it keeps going, Bitcoin (or a successor, for that matter) will probably go through the hype cycle (http://en.wikipedia.org/wiki/Hype_cycle), multiple times over, fractally.

http://upload.wikimedia.org/wikipedia/commons/9/94/Gartner_Hype_Cycle.svg

But it will probably stabilize when it has reached ubiquity and mass adoption, as this is only a matter of depth. We're far from everybody on this planet having used it at least once, directly or indirectly, or at least heard of it.


This refers to a thing called Gresham's Law. This only is valid when the weak currency that people want to get rid of (USD) is enforced by a government. If there is no such enforcement, then think again. People may want to get rid of their weak and devaluing means of exchange (corn, cattle), but merchants will prefer the strong ones (gold, silver, bitcoins).

Good progress made. I think I'll have to sleep on this :)

Then kindly think about the rest of my post, and provide comments here.

21M coins to prevent hyper inflation after bitcoin becomes very popular and there are lots of miners

21 M coins is chosen to represent half of "the meaning of life - 42".
The other half is you spending your coins. That is what life is going to be.

Here are my answers to some of the most important questions about Bitcoin constants.

1. Why mining?
Because mining is a form of involvement - it makes you feel you are a part of something great. Also a certain amount of intellectual capabilities are required to start mining.
In my opinion it is quite difficult for people with IQ below 100 to understand how Bitcoin works.
It is a way to transfer money to smart and open-minded people.

2. Why blocks in 10 minutes ?
It is based on predictions of how Bitcoin will evolve. If less - there would be too much processing overhead for block verification.
if more - transactions will be verified too slowly.

3. Why difficulty adjust in ~ two weeks ?
These are two mini-cycles in world economy - not enough time for big changes to happen
and yet long enough to make you confident on how mining would go during that period.

4. Why halving in for years:
Bitcoin evolution is predicted to happen in 4 year periods:
 - p1: (2009 - 2013) awareness - early adopters, huge fluctuations, heavy debugging. Supply has to be heavy keeping value low enough.

 - p2: (2013 - 2017) primary adoption period - 1000s of businesses start accepting Bitcoin, 1000s of new Bitcoin based businesses pop out.
Supply halved - new businesses are encouraged to accept payments in Bitcoin and eventually exchange later to cover local currency expenses.

 - p3: (2017 - 2021) scaling - system has to be adjusted in order to handle big transaction volumes (> 100 tps)
Supply is low, network is maturing.

 - p4: (2021 - 2025) secondary adoption period - establishment of a new standard in payments based on Bitcoin and other virtual currencies relying on Bitcoin.
Supply is insignificant compared to real trading volumes. Mining is still quite profitable: price slowly rising from $30 000 to about $100 000 per Bitcoin (based on current value of USD).

 - p5: (2025 - 2029) People start using Bitcoin to buy other currencies if needed.

...

P.S. I made these calculations:
My PC (core2 duo 3Ghz, 4 RAM) could currently handle about 50 tps at 1/2 cpu load
and Blockchain database would exhaust my dedicated disk space in about one year (1 TB).

Bitcoin is a Ponzi - but ONLY if it will end (soon). But it doesn't seem so...

Sigh. I feel like I have to respond every time the words "ponzi" and "bitcoin" occur in the same sentence.

@dc7d, you probably don't know what a Ponzi scheme is. Not every form of financial fraud is a Ponzi scheme.

Let's look at what a Ponzi scheme is:


According to this description, a Ponzi scheme has three characteristics:

• 1. It is run by an individual or an organization.
• 2. The operator of the scheme claims to earn profits on investments, but does not. This is the fraudulent part.
• 3. It pays returns to its investors from their own money or the money paid by subsequent investors.

Bitcoin fails #1 because it is not run by an individual or an organization.
Bitcoin fails #2 because the non-existent operator of the scheme does not claim to earn a profit that is paid to investors.

Bitcoin is not and can not be a Ponzi scheme. Anyone that says that Bitcoin is a Ponzi scheme either does not know how Bitcoin works or does not know what a Ponzi scheme is.

You misunderstand the definition you quoted. The part after "rather than" explains what legitimate investments do, not what Ponzi schemes do. Legitimate investments have individuals or organizations running the operation who earn a profit that's distributed to investors. Ponzi schemes don't have this.

If what you quoted was in fact a defintiion (it's not, but that's another story, then Bitcoin would be a ponzi scheme if it paid returns to investors from their own money or money paid by subsequent investors, which of course it does. When you sell bitcoins, the money you make comes from other people who buy bitcoins, many of which are also investors. As you point out, bitcoin has nobody running it who makes a profit they distribute to investors, they key sign of a ponzi scheme by the "definition" you repsented.

Satoshi no individual?

Why do you think he's anonymous? Because of NO profit?

I think you obviously didn't know what i mean: Bitcoin is NO Ponzi now. Until everyone stops mining. I don't think that but who knows.

Satoshi doesn't run anything.  He described how it could work and publicly released the source code for the first software implementation of the concept.  Anyone can do anything they want with that source code, and it has been modified by many people.  It is entirely available to the public, and Satoshi has no control over it any longer.


I wouldn't even try to guess why the person or organization known as Satoshi has chosen to remain anonymous.  It really shouldn't matter since all they did is describe a concept.


If everyone stops mining, then transactions will stop being confirmed.  Of course, that will make it very profitable for someone to start mining again since they will get all the blocks and all the transaction fees.  Then others will start mining too because they will see the opportunity to get some of that profit.  What makes you think everyone would ever stop all mining?

Sorry, maybe i slur. I DON'T think that Bitcoin is Ponzi and i DON'T think that it will stop!

how would you release all at the start? who would get them? that would be unfair.

the software needs "proof of work" to keep the legder balanced and prevent double spending.
that proof is guessing hard math problem. Reward is needed to get people to run their computers
to do this.

The only possible modification that would work is to never limit to 21 million but keep going
forever. However that would not have made bitcoin popular. People only get involved in the begining because
they knew it was a rare limited resource. Who would run their computer electric bills high to get
something that looses value?